In a rare collaboration, Circle, a digital payments startup, worked with the American government, circumventing Nicolas Maduro, the sitting leader of Venezuela. Together, they sought to provide relief to essential workers by giving direct payments. This was possible through the use of stablecoins, cryptocurrencies pegged to fiat money, such as the US dollar. Unlike Bitcoin, stablecoins are not as volatile making them an ideal medium of exchange in third world countries.
What’s going on in Venezuela?
Long story short, the United States doesn’t recognize Maduro, the current sitting leader, as Venezuela’s rightfully-elected president. Instead, they think Juan Guaido should be in power because he won in a fair election. Holding on to power, Maduro attempted to block access to cash within the Venezuelan government even as the state of the country worsens. However, Guaido gained access and seized the regimes funds. Circle is helping distribute such funds to the people through stablecoins such as US digital coins (“USDCs”).
COVID-19 devastated Venezuela. Healthcare workers often lack personal protective gear (PPE) and other necessary medical supplies. Additionally, the country experiences hyperinflation and a deteriorating food supply system. In the current state of turmoil, Venezuelans need foreign intervention.
Stablecoins to the rescue
In an effort to aid the Venezuelan people, Circle stepped in, showing the potential of stablecoins. Specifically, the US Treasury and Federal Reserve releases seized funds (from Venezuela) to Guiado’s government account using an American bank. Guaido’s government then uses the seized funds to mint USDCs. They then transfer the USDCs to digital AirTM wallets that go directly to healthcare workers. In the form of USDCs, individuals may use the currency to send to others, to take out as cash, or to buy items online.
Effectively, Venezuelans get more autonomy and control in their money. Many are in dire need for assistance from not only the pandemic but also from the instability of their government. This is but one example of the potential of stablecoins and cryptocurrency in general. For the first time in history, the United States can directly and digitally provide the opposition with monetary funds, an unprecedented foreign policy move. It will be interesting to see how else stablecoins may be used in the ever-developing digital world.